Are the educational credentials of immigrant and native-born workers perfect substitutes in Canadian labour markets? A production function analysis

Abstract

For the past two decades, most immigrants who arrived in the advanced nations of the western world originated in less advanced countries of the third world. One of the main barriers to their economic integration, as viewed in the public circles of host nations, is the lack of recognition of their educational credentials based on which the suitability of using education as a signal of labour market success of immigrants can be questioned. Canada is a major immigrant-receiving country whose reliance on immigration to meet shortages of skilled labour has increased, especially in its smaller provinces and rural areas. Using a production function approach, this study explores the degree of substitutability of educational credentials of immigrant and native-born labour. It analyses customized data, based on 2001 Canadian census, for 256 census divisions. While immigrant workers in all educational groups are imperfect substitutes for native-born, those with a university degree are the weakest substitutes. However, the value of elasticity of substitution between immigrant and native-born workers is high in all cases, indicating that immigrants are easy to absorb in Canadian labour force regardless of their educational attainment.